Economy · June 23, 2022

PH’s budget deficit narrowed

The Philippine national government’s budget deficit is expected to narrow this year and next, Fitch Solutions said, which fits well with debt sustainability.

The research firm said in a report released Wednesday that it now expects the Philippines’ fiscal deficit as a percentage of gross domestic product (GDP) to be 7.5% in 2022 and 6.2% in 2023, down from. 8.6% in 2021.

The Fitch Group unit said the forecasts have been revised down from the previous estimate of 8.1% in 2022 and 6.7% in 2023 following the release of the National Budget Memorandum (NBM) on June 9, detailing the tax aggregates approved by the Budget Coordination Development Committee (DBCC) on May 24.

The Philippines will begin prioritizing fiscal consolidation in 2022, according to the NBM, with the goal of reducing the budget deficit to 4.1% by 2025.

“Our deficit forecast for 2022 is slightly below the official 7.6% of GDP projection due to a slower economic growth assumption,” explained the research firm, “while our forecast for 2023 is slightly broader than the government’s projection of 6.1% of GDP as we expect spending to exceed the official target. “

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According to the NBM, the Philippine economy will grow 6.9% in 2022, from 5.7% in 2021 but 0.1 percentage points below the lower end of the DBCC-approved growth band 7 to 8. %.

Fitch Solutions also said it expects revenue growth of around 10% in 2022 and 2023, which is in line with official forecasts and an improvement from the 5.2% recorded in 2021, as tax and non-tax revenue they increased by 23.7% in the first quarter of this year, indicating that the economy is reopening with the resumption of more productive activities.

“Furthermore, Marcos has shown a willingness to implement the tax reforms proposed by the Duterte administration. These reform programs aim to bring at least P349.3 billion in new revenue each year and reduce the debt-to-GDP ratio to 55.4% of the total. economy by 2025, “he added, referring to President-elect Ferdinand” Bongbong “Marcos Jr.

Meanwhile, the research firm said it expects disbursements to increase by 6% in 2022, surpassing the official target of 2.6% in 2023, as the incoming Marcos administration has signaled it will maintain a favorable fiscal policy in the next. future to support the economy, growth and recovery.

It also predicted that spending will increase by 4% in 2023, significantly above the official 2.6% target.

Finally, the Fitch Group unit expects lower risks to the government’s fiscal position in the short term, estimating a peak of 60.6 percent in 2022 and 60.9 percent in 2023, before gradually declining from 2024 onwards.

“Although public debt as a percentage of GDP rose to 59.9% in 2021 compared to 39.6% before the pandemic, it is likely that plans for fiscal consolidation on the back of the increase in tax revenues and the rebound of the economy bodes well for fiscal sustainability “, reads the note. She said.